1. DEVELOPING NEW PRODUCTS AND SERVICES

2. Layers of the Product Concept

3. The Core Product
Consists of all the benefits the product will provide for consumers or business customers
A customer purchases a 1/2” drill bit. What does s/he want?
A 1/2” hole!
Marketing is about supplying benefits - not products.

4. The Actual Product
Consists of the physical good or delivered service that supplies the desired benefit
Example:
A washing machine’s core product is the ability to get clothes clean, but the actual product is a large, square, metal apparatus
Actual product also includes appearance, styling, packaging, and the brand

5. The Augmented Product
Consists of the actual product plus other supporting features such as warranty, credit, delivery, installation, and repair service after the sale

6. Classification of consumer goods

7. Classifying Products

8. Shopping Products
Good or service for which consumers will spend time and effort gathering information on price, product attributes, and product quality
Consumers will tend to compare alternatives before making a purchase
Types of shopping products
attribute-based shopping products
price-based shopping products

9. Specialty Products
Goods or services bought with much consumer effort in an extended problem- solving situation
Consumers insist upon a particular item and will not accept substitutes
Example:
Sony’s AIBO Robot Dog

10. Unsought Products
Goods or services for which a consumer has little awareness or interest until a need arises
Require a good deal of advertising or personal selling to interest people

12. Business Products Equipment: Installations & Accessories Specialized
Services
Processed
Materials
Business
Product
Classes
MRO
Supplies
Raw
Materials
Component
Parts and
Materials

13. Life-Changing InnovationsCD
Photocopier
Fax
Cell phone
Post-it Notes
Air conditioner
Microwave
What is your favorite
life-changing innovation?

14. Types of Innovations
Innovations differ in their degree of newness and this helps to determine how quickly products will be adopted by a target market
The more novel the innovation, the slower the diffusion process
Innovation continuum is based on the amount of disruption or change

15. Innovation Continuum Continuous Dynamically Discontinuous Continuous
Little to no change Extreme changes

16. “New” Products What is a New Product?
Newness Compared with Existing Products
Newness in Legal Terms
Newness from the Company’s Perspective
Newness from the Consumer’s Perspective

17. Consumption effects define newness

18. Marketing Reasons for New Product Failures
Insignificant “point of difference”
Incomplete market and product definition
Too little market attractiveness
Poor execution of the marketing mix
Poor product quality or sensitivity
Bad timing
No economical access to buyers

19. Stages in the new-product process

20. Marketing Strategy Development
Develop a marketing strategy that can be used to introduce the product to the marketplace
Identify the target market
Estimate its size
Determine how the product can be positioned
Plan pricing, distribution, and promotion expenditures necessary for roll-out

21. Idea Generation Sources of new ideas customers salespeople
research and development breakthroughs
competitive products
anyone with direct customer contact

22. Product Concept Development and Screening
Expand ideas into more complete product concepts
Describe what features the product should have and benefits those features will provide for consumers
Evaluate the chance for technical and commercial success – internal and external

23. Business Analysis
Assess how the new product will fit into the firm’s total product mix
Evaluate whether the product can be a profitable contribution for organization’s product mix
Only after approval at this stage does significant development $$ expenditure begin

24. Technical Development
Work with engineers to refine the design and production process
Develop one or more prototypes
Evaluate prototypes with prospective customers
If applicable, apply for a patent

25. Market Testing
Try out the complete marketing plan - product, price, place, and promotion - in a small geographic area that is similar to larger target market
Traditional test marketing is expensive and gives competition a chance to evaluate the new product
Simulated test markets eliminate competitive viewing and cost less

26. Six important U.S. test markets

27. Commercialization Launch the product! Full scale production
Distribution
Advertising
Sales promotion
and more

28. Adoption and Diffusion Processes
Adoption is the process by which a consumer or business customer begins to buy and use a new good, service, or idea
Diffusion describes how the use of a product spreads throughout a population

29. Six Stages of Adoption Confirmation Adoption Trial Evaluation Interest
Awareness

30. Diffusion Process
Concerned with the broader issue of how an innovation is communicated and adopted throughout the marketplace
The process of spreading out - PLC
Adopter categories
Five different type of consumers
Normal distribution

31. The Product Life Cycle

32. Adopter Categories Mean Time of Adoption Innovators (2.5%) Early
Adopters
(13.5%)
Early
Majority
(34%)
Late
Majority
(34%)
Laggards
(16%)

33. Innovators 2.5%, the first to accept a new idea or product
Venturesome and willing to take risks
Cosmopolites: willing to seek social relationships outside of their local peer group
Rely heavily on impersonal information sources

34. Early Adopters 13.5%, the second to adopt an innovation
Heavy media users
Tend to be concerned with social acceptance
Opinion leaders primarily come from the early adopter group

35. Early Majority
34% adopt the product prior to the mean time of adoption
Deliberate and cautious
Spend more time in the innovation decision process
Slightly above average in education and social status

36. Late Majority 34% follow the average adoption time
Older, more conservative
Peers are the primary source of new ideas
Below average in education, income and social status
Wait to purchase until product has become a necessity and/or peers pressure to adopt

37. Laggards 16% - last to adopt an innovation
Lower in social class than other categories
Bound by tradition
Product may have already been replaced by another innovation

38. Marketing information and methods used in the new-product process